Eviction Doomsday Isn’t Coming. Here’s Why
The expiration of the federal eviction moratorium over the weekend incited panicked headlines warning of an “evictions doomsday.” Reports suggest more than 11 million renters are at risk of eviction just as a new variant of COVID-19 spreads.
The mass eviction narrative has dominated headlines and policy discussions for 16 months, even as nearly every other economic indicator sharply rebounded—jobs and wages, personal savings and debt, home sales and apartment demand—following what turned out to be the shortest recession in American history.
As for the so-called evictions tsunami? Well, it’s highly improbable for a long list of reasons. And that’s great news for everyone.
Nearly every mass eviction forecast is based on one tiny, experimental dataset its creators acknowledge is problematic. There’s far more solid evidence suggesting the vast majority of renters are able and willing to pay rent. We’ll likely end 2021 with far fewer evictions than we saw in a typical year pre-pandemic, and there’s little reason today to believe 2022 can live up to eviction forecasters’ fears. This follows 2020, where we were among the few correctly predicting a huge decline in evictions in 2020 even prior to the federal moratorium—including markets where bans were not in place.
Before we share the many facts challenging the evictions doomsday narrative, it’s important to acknowledge that eviction filings will occur, and even one is too many. Evictions are a lose/lose. It’s also critical to highlight the small share of renters struggling to pay rent, the vast majority of whom struggled long before COVID-19 hit. Those renters deserve compassion and focus, but their plight has been obscured by policymakers’ “chainsaw not scalpel” approach. It’s also true that $47 billion in rental assistance funds have gone out way too slowly.
It’s critical to get the facts correct, so we can drive aid toward those truly in need and adequately fund the root problem – a severe shortage of government-supported affordable housing. Here are the facts pointing to a far less dire evictions outlook.
Eviction Forecasts are Based on a Miniscule, Problematic Dataset
Nearly all studies predicting an evictions tsunami are based on the Census Household Pulse Survey. The name implies prominence, but the Census itself cautions that HPS is far less robust than other datasets. There are two big fundamental flaws.
First, it’s an incredibly small survey. In the most recent periods, the Census captured around 70,000 respondents per surveyed period. That’s not just renters. That’s all households. Reports indicate that renters comprised anywhere from 16% to 25% of respondents. That implies somewhere between 10,000 to 20,000 renters participated in each of the recent Pulse surveys. How significant is that? It represents between 0.02% and 0.04% of the nation’s 47.2 million rentals. Not good.
Second, the Census itself disclosed a big methodology challenge related to “non-response bias.” (The Census employs many brilliant researchers, but they’ve long been hamstrung by underfunding.) This gets a little wonky, but it’s critical to understanding the facts behind the evictions narrative – and why HPS may be under-representing renters paying their rent.
The Census labels HPS data as “experimental,” urges users to “take caution” when analyzing the data, and recommends researchers include warnings on non-response bias in their work (which very few do). Census researchers usually work around small-sample issues with sophisticated weighting methodologies. But the Census admits unusual challenges with non-response bias in HPD surveys—noting that “weighting adjustments are limited by a lack of information about nonresponding units.” Because HPD covers so many new topics (including rent payments), there’s no benchmark on what subpopulations are missed or underrepresented. In simple terms? It means HPS has a huge blind spot because it doesn’t know what it doesn’t know.
Despite all these caveats from the creators of the survey, eviction forecasters have largely ignored the warnings and mispositioned the data to be rock solid.
Household Pulse Surveys Have Obvious Holes
Given the Census team’s warnings, it’s no surprise to find obvious holes in rent payments data from the Household Pulse Survey.
For example, the Census shows Dallas/Fort Worth and Atlanta in the top five metros for rent debt—lumping the booming Sun Belt metros in with New York, Los Angeles and Detroit. That is extremely improbable for several reasons. Both Atlanta and Dallas are well ahead of the national pace in the economic rebound, and there is not a single supporting datapoint suggesting either metro ranks among the nation’s worst by any other economic measure of significance.
Additionally, both Atlanta and Dallas (unlike New York or Los Angeles) have an outsized concentration of large, professionally managed apartment properties—and few “mom and pop” rentals. That is a key factor, because there’s abundant data showing that large, professionally managed apartments are collecting rent at near-normal levels. RealPage data on actual collections in both Atlanta and Dallas (with coverage in both markets individually topping what the Census tracks nationally) showed that more than 96% of apartment renters paid rent in June 2021—and the numbers have been consistently high throughout the pandemic era. By comparison, the Census surveys show that 21% of Atlanta renters and 16% of Dallas/Fort Worth renters are behind on rent. That doesn’t make sense at all, and it raises a big red flag over the broader dataset.
Larger Datasets Show Much Healthier Rent Collections
An honest evictions forecast must consider all available data, but most researchers aren’t doing that—relying exclusively on tiny-sample Census surveys and ignoring vastly larger datasets representing different subsets of the rental housing universe.
For example, the National Multifamily Housing Council collects actual payments data on 11.5 million units. That’s 450x more than Census surveys, and it’s one-fourth of all rentals nationally. And it’s not a survey; it’s real payments data. NMHC data shows nearly 96% of apartment renters paid rent in June 2021, and that was off only 0.4 percentage points. That’s a very big deal. In single-family rentals, surveys by the National Association of Realtors last year reported rent collections at 95%. Large single-family rental owners have reported even better numbers.
But eviction forecasters pushed back hard against NMHC and NAR data, and convinced policymakers and reporters to largely ignore it. They noted that industry groups represent larger apartment properties and bigger single-family portfolios. It’s true these datasets do not cover “mom and pop” rental housing owners, who command significant market share in the most challenged markets, like New York. But rather than dismissing it altogether, why not apply those larger datasets to represent their share of the market? For example, NMHC’s data covers roughly 25% of the rental stock, so apply the 96% payments number. That one simple step would significantly reduce any researcher’s estimated number of households “at risk” of eviction.
Rental Housing is a Hot Market
Typically in periods of distress, we’ll see demand-side issues cause erosion in housing fundamentals. But that’s not happening in 2021. The market-rate apartment sector is having its best year in decades—if not ever—with record numbers in demand, occupancy and rent. Renters are flooding in with higher incomes and consistently paying the rent. The single-family market is more fractured, but similar trends have been reported in professionally managed portfolios.
Jobs are Coming Back, Incomes are Up
National unemployment dropped to 5.9% in June. Yes, that’s well above the 50-year low of 3.5% set in February 2020. But over that 50-year period, the national average was 6.2%—meaning today’s unemployment rate is better than the long-term average. Job openings hit the biggest numbers on record, and many employers are going to unprecedented lengths to hire more workers. The labor shortage is driving up incomes. Wages surged 6.6% between February 2020 and June 2021. In market-rate apartments nationally, RealPage data shows huge growth in incomes for renters signing new leases. In May, average household income for new renters hit a new high of $68,000.
Personal Savings are Up, Debt is Down
There’s a false narrative that Americans are spending out of savings – or going into debt—to pay rent. While that’s certainly true in some cases, it’s not typical.
In fact, personal savings are up significantly. In May, the personal savings rate hit 12.4%—up from 8.3% in February 2020 and well above the historical average of 9.0%, according to data from the Federal Reserve. Household debt service payments as a percentage of disposable personal income hit an all-time low 8.2% in 1st quarter 2021, according to the Federal Reserve. Credit card delinquency rates also hit a record low at 1.89%. Federal checks certainly helped many households pay down debt and increase savings.
Multifamily Mortgage Forbearances Remain Very Limited
To help rental property owners, big lenders offered forbearance programs that allow them defer mortgage payments. If there were indeed major problems, that should be apparent in the number of forbearance requests from Freddie Mac, which owns a massive share of multifamily mortgages. But forbearance requests have remained consistently low. As of June 2021, only 3.0% of properties in their mortgage pool were in forbearance. Previous reports indicate the majority of properties in forbearance were “small balance”—meaning more likely to be smaller, family-owned rentals.
Property Managers Have Stepped Up
If a mass eviction crisis loomed, you would expect renters to be widely unhappy with their landlords. But as it turns out, those anecdotes don’t align with most renter experiences across the country.
J Turner Research pioneered the concept of the ORA Score—or “online reputation assessment.” ORA Scores in apartments nationally increased 109 basis points between May 2020 and May 2021, based on a same-store analysis by RealPage of both conventional and affordable housing. That means apartment renters are happier today with their property managers than they were last year—even through a pandemic. Those gains trace to yeoman efforts by property managers to protect their renters throughout the pandemic—funding rental assistance funds, providing flexible payment programs, and offering creative virtual solutions for residents to engage with each other and with site staff. (For full disclosure: the RealPage study focused only on professionally managed apartments.)
Going forward, NMHC has issued guidance to property managers on evictions that would likely help further reduce evictions going forward.
Rental Assistance Funds are Underutilized
Congress allocated nearly $47 billion toward its Emergency Rental Assistance program based largely on the same problematic datasets that forecast a mass eviction wave. Six months after its creation, only around 3% of the funds have been spent. Housing advocates have been quick to blame the slow pace of bureaucracy. That is certainly a contributing factor, and those delays must be addressed quickly. But is that the only factor? Curiously, no one is asking what should be a logical question to ask: Was it too much, too late? If funds remain unspent, Congress would be wise to reallocate those funds toward addressing the structural, pre-pandemic affordability challenges – either through vouchers or (even better) creation of new affordable housing.
Local Eviction Bans Persist
One of the more curious omissions by eviction forecasters: Few are adjusting for localized eviction bans that will outlast the federal moratorium. Not coincidentally, extended bans tend be concentrated in big coastal states harder hit by economic challenges related to the pandemic. As examples: California and Washington extended their eviction moratorium through September 30. New York’s runs through the end of August. New Jersey’s ban goes until January 1, 2022, but the state is considering a novel approach to weed out abuse, where higher-income renters could be evicted sooner. It’s worth pointing out that in these types of markets, local or state bans could very likely be extended further as local advocates pressure policymakers.
The expiration of the federal eviction moratorium does not open up the floodgates for immediate actual evictions, but it does open the door. The actual process and timeline can vary significantly based on location and asset-specific factors. It’s important to note that an eviction notice or filing does not mean an actual eviction. That process takes time, and often resolves amicably. When cases do go to court, they rarely move quickly—particularly with many local courtrooms backed up.
The evictions narrative has stolen attention away from the severe undersupply of affordable rental housing. According to Harvard, we need 8.3 million additional units of designated affordable housing just to meet current demand. The Biden administration has proposed funding to build or maintain 2 million additional units—which would be a significant start. More affordable housing creation is the single-most important step in solving America’s structural rental distress – a challenge that existed long before COVID-19.